Lay-by your next holiday

Lay-by your next holiday

You can buy a pair of jeans, a designer watch, and even a flat-screen TV on lay-by. In fact, there are not many large purchases you can’t put on a payment plan these days.

But travel remains an exception. Lay-by schemes are still a rarity in the holiday industry, which typically requires that payments be made in two parts; a deposit and then the balance. But a handful of companies are breaking the mould and offering more flexible payment options to clients.

It’s a growing trend since the recent economic downturn as Australians tighten their belts and reconsidering holiday plans, according to a spokesman for Australia New Zealand Travel.

“We’ve had people cancel holidays in India,” he said, “only to rebook into Port Douglas and Hamilton Island, places like that.”

The benefits of “lay-by” holidays, he claims, are self-evident: “It’s obviously easier to do this than pay off your credit card with 18 to 19 percent interest. What you save on interest alone you could spend on better restaurants while you’re away”.

Worldwide Holidays is a prime example of a travel company offering lay-by holidays. Earlier this year the travel company added a new lay-by scheme with weekly or monthly payments.

At the time, Worldwide Holiday’s director, Dipak Kumar, told Fairfax that customers had shown an interest in the lay-by option, which is available only for bookings that cost $1200 or more, which rules out the average weekend away.

There are no fees charged for the payment plan, with the price quoted on the website the total amount to be paid, he said.

“The popularity of lay-by has been mainly [among] families with kids,” he said. “A lot of families struggle with finances and this gives them the chance to have a holiday without the stress of maxing out their credit card.”

Even larger firms, such as Intrepid Travel, are seeing the benefit of such schemes. Intrepid collects a deposit and then allows passengers to pay the rest in any instalments they choose, so long as the balance is paid in full 60 days ahead of the trip.

At the time of launching payment plans, then-Intrepid spokeswoman Meg Koffel said: “Travel is a tonic for these tough times. We’re looking at a number of ideas to ensure people can continue to get away on holiday”.

As with all deals that look too good to be true, however, it pays to be cautious when it comes to payment-plan holidays. Be sure to check the company’s website for testimonials, terms and conditions and hidden costs.

Can’t afford to wait?

With Christmas just a few weeks away, saving for a holiday may not be an option for many families. For those there’s the credit card option to consider, of course. But it may be difficult to imagine a worse way to fund an entire holiday, than by plastic. Returning home, the relaxing effects of your trip quickly dissipate when your credit card bill arrives in the post.

It’s this sentiment that has forced credit card providers to lift their game and find new ways to add value to their offerings, said Michelle Hutchison, spokeswoman for RateCity.

“In the past, rewards credit cards have offered benefits such as free flights and free merchandise. But the trade-off was often high rates of interest and cardholders would have to spend tens of thousands of dollars to see any real reward,” she said.

“Today, credit card providers are facing tougher times and working harder at attracting and retaining their customers.”

Some of the lower-rate cards now offer “premium card facilities”, including travel insurance, VIP seating and concierge services to name a few.

So if you’re paying an annual fee of around $100, then you should demand a few perks, said Hutchison.

“If your low-rate card doesn’t give you access to premium facilities, think about comparing credit cards and switching for a better deal. Because it could mean you get that holiday you’ve been dreaming of sooner!”

Make sure you read the fine print – the terms and offers of the services can vary significantly between cards.


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Learn more about credit cards

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

How does credit card interest work?

Generally, when we talk about credit card interest, we mean the purchase interest rate, which is the interest charged on purchases you make with your credit card.

If you don’t pay your full balance each month (or even if you pay the minimum amount), you are charged interest on all the outstanding transactions and the remaining balance. However, interest is also charged on cash advances, balance transfers, special rate offers and, in some cases, even the fees charged by the company.

The interest rate can vary, depending on the credit card. Some have an interest-free period, otherwise you start paying interest from the day you make a purchase or from the day your monthly statement is issued. So avoid interest by paying the full amount promptly.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.